Seizure of FC - Tribunal fell in error by converting absolute confiscation into confiscation with option to redeem - Also allowing 25,000 USD as permissible amount is not correct - Question of law answered in favour of Revenue: HC
By TIOL News Service
CHENNAI, SEPT 25, 2014: THIS is an appeal by revenue against the order of Tribunal reported in 2005-TIOL-515-CESTAT-MAD. Please also see Confiscation of foreign currency : Can redemption be allowed?
USD 55,500 was seized from an individual who died on 3.10.2001. Since there was no RBI clearance for the above foreign exchange it was absolutely confiscated and penalty of Rs five lakhs was imposed.
On appeal by the successor, the Tribunal held that though the currency was required for remittance for technology purposes, it was a fact that the same was not remitted through legal channels nor procured through legal routes and held that USD 25,000 was permissible to be carried by any passenger going abroad during the material time and the absolute confiscation was converted into confiscation with an option to redeem on payment of fine of Rs two lakhs.
Against the above order of Tribunal, revenue is in appeal before the High Court with the following questions of law:
(i) Whether the Tribunal was justified in allowing the redemption of the foreign currency attempted to be exported in violation of the provisions of law?
(ii) Whether the Tribunal was justified in reducing the quantum of penalty?
After hearing both sides, the High Court held:
In the present case, the passenger has concealed the currency of 55,500 US dollars and other currencies, attempted to be take it out of India without a special or general permission of the Reserve Bank of India and this is in violation of the Rules. The fact that it was procured from persons other than authorized person as specified under the FEMA, makes the goods liable for confiscation. Therefore, the Original Authority was justified in ordering absolute confiscation of the currency. The key word in Regulation 5 (Foreign Exchange Management - Export and Import of Currency Regulations, 2000) is prohibition of import and export of foreign currency. The exception is that special or general permission should be obtained from the Reserve Bank of India, which the passenger has not obtained and therefore the order of absolute confiscation is justified in respect of goods prohibited for export, namely, foreign currency.
It is of no avail to plead that the foreign currency upto certain limit is permissible. The Tribunal has misguided itself in holding that upto 25,000 USD is permitted to be carried by a passenger while going abroad. This error arose from a misreading of Clause 8 of Schedule III of Foreign Exchange Management (Current Account Transactions) Rules, 2000. Clause 8 of Schedule III speaks about release of foreign exchange, exceeding USD 25,000 to a person irrespective of period of stay, for business travel, or attending a conference or specialized training or for maintenance expenses of a patient going abroad for medical treatment or check-up abroad, or for accompanying as attendant to a patient going abroad for medical treatment/check-up.
Schedule III also come with the rider that prior approval of the Reserve Bank of India should be obtained.
The Tribunal, without adverting to the prohibition imposed under Regulation 5 of the Foreign Exchange Management (Export and Import of Currency) Regulations, 2000 has come to the erroneous conclusion that the amount not exceeding 25,000 USD may be freely taken out of India. If both the Rules and Regulations are properly applied to the facts of the present case, it will be evident that the first respondent - passenger in this case has clearly violated the provisions of the FEMA, more particularly Regulation 5 of the Foreign Exchange Management (Export and Import of Currency) Regulations, 2000 read with Section 113 of the Customs Act. Therefore, the Tribunal fell into error by setting aside the order of absolute confiscation.
Accordingly, the High Court answered the first question of law in favour of revenue.
However, with regard to penalty, the High Court after taking note of the fact that the respondent had died and the appeal was pursued by his wife, declined to interfere with the reduction of penalty by the Tribunal.
(See 2014-TIOL-1662-HC-MAD-CUS)
